Rising water prices to boost housing costs

Higher costs to deliver water to homes are pushing the Fort Collins-Loveland Water District to raise its fees for new water service.

Nov. 27, 2012

Framers install sub-flooring on a house in the Timnath Ranch subdivision on Nov. 21. The Fort Collins-Loveland Water District is raising its connection fees by $2,000 per new connection during the coming year. / V. Richard Haro/The Coloradoan

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A row of homes being built in the Timnath Ranch subdivision are shown here on Nov. 21. Due to increases in demand and costs to deliver water to the area it serves, the Fort Collins-Loveland Water District is raising its connection fees by $2,000 per new connection over the coming year. / V. Richard Haro/The Coloradoan

By the numbers Fort Collins- Loveland Water District

• Area: 60 square miles • Customers: about 15,000 • Customers at buildout: about 30,000 • New water connections in 2012: 500 • Most new connections: about 900 (2002) • Fewest new connections: 94 (2009)

Water providers eye possible use restrictions

Fort Collins Utilities and other local water providers are keeping a close eye on the mountain snowpack, or lack thereof. If dry weather continues through the winter and spring, water-use restrictions might be imposed next year, said Brian Janonis, executive director of Fort Collins Utilities. “It’s a real possibility,” he said. A decision on restrictions depends on how much snow falls in December and March, usually the snowiest month of the year. Other local water providers are likely to follow Fort Collins’ lead on restrictions. “We’re all playing the wait-and-see game,” said Mike Scheid, general manager of the East Larimer County Water District.

A row of homes face the morning sun in the WaterLeaf subdivision on Nov. 21. Due to increases in demand and costs to deliver water to the area it serves, the Fort Collins-Loveland Water District is raising its connection fees by $2,000 per new connection during the coming year. / V. Richard Haro/The Coloradoan

A sold sign stands in an empty lot in the Timnath Ranch subdivision on Nov. 21. Due to increases in demand and costs to deliver water to the area it serves, the Fort Collins-Loveland Water District is raising its connection fees by $2,000 per new connection over the coming year. / V. Richard Haro/The Coloradoan

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The resurgence of the housing market in south Fort Collins and Timnath and a jump in the price of water are pushing up the cost of future growth.

The Fort Collins-Loveland Water District, which provides water to much of the area south of Harmony Road, north of Loveland and west of the Larimer-Weld county line, last week raised the cost to connect water to a new home from $16,000 to $18,000.

The bump will go into effect gradually, with an extra $1,000 to cover the cost of acquiring water beginning Feb. 1 and an additional $1,000 to support the district’s water delivery infrastructure beginning June 1.

The higher fees are needed to cover the rising expense of water and the demand for new service in the district’s coverage area, said Mike DiTullio, the district’s longtime manager.

The district has provided about 500 new connections — called taps — this year, he said. About 200 have come from the Timnath area; other hotspots are around Provincetowne and Observatory Village in south Fort Collins.

“That’s a pretty good number of this economy,” DiTullio said. “The builders are feeling a little more comfortable and they obviously have plenty of demand.”

Growth in the district’s coverage area is high compared to other water providers. Fort Collins Utilities has had 120 new connections for single-family residences so far this year, along with seven duplexes, 55 multifamily buildings and 32 commercial buildings.

The East Larimer County Water District, which serves a large area north of the city, projects it will have 210 new taps this year, said general manager Mike Scheid.

The Fort Collins-Loveland Water District has “justification” for boosting its connection fees because of its higher costs to acquire the water it delivers, said local homebuilder Steve Spanjer of Spanjer Homes.

And the higher costs, which will be passed along to homebuyers, are not likely to have much impact on the pace of growth in the district’s 60-square-mile coverage area given its popularity, he said. But raising the cost could have consequences.

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“Any time the price increases for consumers, it makes it more difficult for people to qualify,” he said. “It’s just inflationary.”

Pricey water

About 95 percent of the district’s water comes from Horsetooth Reservoir, which is supplied through the Colorado-Big Thompson, or C-BT, water system.

Fueled by growing demand and tighter availability, the cost of a share of C-BT water has risen from about $8,500 to $11,000 in recent months, DiTullio said.

A share is one acre-foot of water, enough to serve the needs of one or two urban families. The district “is always looking to buy more water” to meet its future needs, which are projected to be about double its current holdings by the time its service area is built out, he said.

The district made a compelling case for why its tap fees had to increase during a meeting last week of its board of directors, said Greg Miedema, executive officer, Home Builders Association of Northern Colorado.

But the builders appreciated the board’s willingness to phase in the higher fees so they could cover existing contractual agreements.

“They are paying more for water than they are charging for it,” he said. “Nobody expects them to keep doing that.”

A complication for developers is the price differential among water providers for new taps, Spanjer said. Each has a different way of calculating fees; each has different requirements.

The water district covers about half of the Fort Collins Urban Growth Area and has about 8,000 customers who live in the city. Even within city limits, water-related development fees vary greatly depending on which side of Harmony Road a house is built, Spanjer said.

“We might be 2 miles apart, but we can be more than $13,000 apart; that’s a big price difference,” he said.

In addition to fees to support its water-delivery system, Fort Collins Utilities requires developers to provide water shares to serve the residential and commercial buildings they build or pay a fee based on lot sizes.

For a 9,000-square-foot lot for a single-family home, connections to water and sewer would cost $13,021.

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Under the water district’s new fee structure — and adding the cost of a sewer connection to South Fort Collins Sanitation District facilities — the cost would be $22,500.

Fort Collins Utilities and the East Larimer County Water District plan to conduct studies in the coming years to determine whether their fee rate structures should change.

Bouncing back

The economic downturn drove most national homebuilders from the Northern Colorado market several years ago. Much of the growth around the area is from local builders picking up lots where infrastructure has been in place “for years,” DiTullio said.

No major housing projects are on the horizon outside of multifamily developments in the Fort Collins service area.

This year’s uptick in residential water connections is likely a reflection of a “pent-up” market breaking out. Things are likely to stabilize in the years to come, DiTullio said. The district averages about 350 new taps a year.

“We’re not pushing growth; we’re just there to provide a service,” he said. “We’re not in the land-use business.”